'Why are you fighting with the Gupta family?' - A tale of Eskom's capture
Former head of generation and once upon a time acting group chief executive at Eskom, Matshela Koko, intervened in a dispute over coal test results, coming out to bat for the Gupta team.
A new forensic report by Fundudzi Forensic Specialists into irregularities and maladministration at Eskom and Transnet around state capture paints a new picture of Koko's involvement in the Guptas capture of state-owned power utility, Eskom.
Fundudzi set out its findings in painstaking detail over 700 pages. The final report was published by National Treasury on Friday.
It reveals that the R659m prepayment for coal to the Gupta’s Tegeta Resources was irregular and a coal supply agreement concluded in 2015 between Eskom and the Tegeta-owned Brakfontein Colliery worth R3.5bn over 10 years was also irregular.
Key Eskom officials are found not to have dealt with the deals in a manner that protected Eskom’s best interests and in fact, had bent over backwards to accommodate the Gupta companies.
Why are you fighting with the Gupta family?
The disastrous coal supply deal between Gupta-owned Brakfontein and Eskom worth R3.5bn has been well covered in the media.
The Fundudzi report, however, found new details surrounding the negative effects on Eskom and how managers at the power utility rolled out the red carpet for the Gupta mine.
It also reveals that Koko intervened when a dispute arose surrounding the quality of coal Brakfontein was supplying to Majuba power station.
Koko raised allegations that staff at laboratories responsible for testing coal samples were accepting bribes.
Happing Masuku of Sibonisiwe labs told investigators that he was called to a meeting with Koko who asked him why he was fighting with the Gupta family by giving them "unfavourable results".
The quality of coal supplied is a crucial condition of coal supply agreements as multi-billion rand power stations could be damaged if the incorrect types of coal are used.
Investigators also found that in the first three years, Tegeta had invoiced Eskom a staggering R1.2bn – nearly half the contract value of R3.5bn which expires in 2025.
R659-million payday
Eskom executives also assisted the Guptas in their bid to purchase one of South Africa’s biggest coal mines, Optimum, from global mining giant Glencore.
On April 14, 2016, the Gupta’s payment of R2.15bn for Optimum was due. By April 11, they were still short of R600m.
In the months leading up to the Guptas tabling an offer to purchase, Eskom executives, including former group chief executive Brian Molefe, exercised pressure on Glencore by levying penalties of R2.1bn, effectively forcing the mine into business rescue.
Piers Marsden, a business rescue practitioner appointed by Glencore, was contacted by Nazeem Howa – another key Gupta associate and former CEO of TNA media - and told the Guptas were short R600m on April 11, the report found.
Howa the requested he go to the banks to request that Tegeta pay R1.5bn and arrange to pay R600m over three months.
The banks refused.
But by then, a R650m prepayment had already been discussed with Eskom.
After Marsden returned to Howa with the bad news at around 15:00 on April 11 2016, Tegeta director Ravindra Nath sent an email to senior general manager of fuel sourcing, Ayanda Nteta at 16:27.
Nath’s email set out a R650m "advance payment" for 1.25 million tonnes of coal over a period of five months at R20.41 a gigajoule.
While the letter set out this was an “offer” from Tegeta to supply additional coal, it later states that the R650m will be "pre-paid by Eskom to meet the cost for the additional production".
Discount offered
Nath, on behalf of Tegeta also offered a discount of between 2 or 5%. This was later determined at 3.5%, which both Koko and former chief financial officer Anoj Singh both claimed they had negotiated for.
At 21:00 that same night an urgent Board Tender Committee Meeting was held via teleconference. The Fundudzi report points out that a normal board meeting was scheduled for April 13 and that it was unclear why the matter could not be dealt with then.
The investigation also determined that Nath backdated their letter requesting the prepayment to April 8.
The entire transaction is set out in great detail and investigators concluded that the Eskom and Tegeta officials contravened the Prevention and Combating of Corrupt Activities Act, Precca.
Furthermore Koko, Singh, Nteta former head of legal Suzanne Daniels and former acting head of procurement Edwin Mabelane contravened the Public Finance Management Act and they all “may have received gratification for assisting Tegeta to receive the prepayment”.
Criminal investigations recommended
The report further recommends criminal investigations by the Directorate for Priority Crime Investigation, the Hawks, into the Eskom officials.
Similarly, board members including chairman Zethembe Khoza and board tender committee members Nazia Carrim, Viroshini Naidoo and Chwayita Mabude should also be investigated.
Gupta owned Oakby CEO Ronica Ragavan, and all other Tegeta directors including Nath are included in the list.
Singh and Koko should also face charges relating to their misrepresentation to the Parliamentary Portfolio Committee on Public Enterprises for claiming they had negotiated the discount.
Fundudzi found that there was no indication whether Tegeta had supplied the coal they were paid in advance for.
Koko, when asked what he made of the report on Twitter, said that “the police must do their work without fear or favour. I have no worries in my eyes."
